Frequently Asked Questions

Debt Management Pros and Cons

What are the Advantages of a Debt Management Plan?

A debt management plan will give you the satisfaction that you are paying ALL your debts. You will no longer need to juggle your payments and worry about those unexpected bills that life tends to throw at you

Other Advantages:

- You will have one payment each month.

- You will no longer need to communicate with your existing creditors

- Your chosen debt management company will request that interest and charges are frozen. This will stop your debts growing, enabling you to pay back the money you have borrowed.

What are the Disadvantages of a Debt Management Plan?

There are some disadvantages with a Debt Management Plan.

If your creditors refuse to freeze or lower your interest, paying a reduced amount over a longer period could increase the amount you repay.

- You are still required to repay in full any items of credit that are not included in your debt management plan.

- A Debt Management Plan will affect your credit rating in the medium to long term. As you are repaying your debts at a reduced rate, your lenders are legally obliged to send you a Default Notice to say your account is in arrears. A Default Notice will remain on your credit file for 6 years.

IVA Pros and Cons

What are the Advantages of an IVA?

One of the main advantages of an IVA is that it's legally binding. Once the contract is in place your creditors have to leave you alone, including the phone calls and letters.

Other advantages:

- Unsecured debts that are still outstanding at the end of the IVA period are written off - possibly 50% - 60% of the debt balance you begin with.

- You will also be able to set a fixed monthly household budget because your debt management adviser will help you fix an IVA repayment at a monthly amount that you can afford to repay.

- With an IVA your mortgage or rent payment along with your utility bills are always treated as a priority.

What are the Disadvantages of an IVA?

Remember, it's legally binding.

For an IVA to be agreed, creditors owing a minimum of 75% of your debts much accept the IVA. It is possible for creditors owning 25% of the debt to block the agreement. At this time you will need to consider an alternative debt solution such as bankruptcy or a debt management plan. as bankruptcy or a debt management plan.

Other disadvantages:

- Even with a legal debt solution it takes time for creditor notification - so even though creditors shouldn't harass you further, it could take a number of weeks for them to stop calling you.

- Although you make your agreed monthly payments on time, it will be 6 years from the starting date before the IVA will be removed from your credit file.

- Failure to make the agreed payments could result in your creditors moving you towards filing for bankruptcy – this will have a severe effect on your financial future.

- Using an IVA could create future credit problems so make sure it's the best of the solutions available before settling on this option of debt management.